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Carlyle Buys Large Stake in TCW

Hagstrom out at Legg Mason, Janus shuffles managers, and more. 

Morningstar Fund Analysts, 08/10/2012

Carlyle Group and TCW announced that two Carlyle-backed investment funds will be acquiring TCW from Societe Generale in a deal that's expected to place 60% of the firm in Carlyle hands and leave the other 40% of the firm's equity in the hands of employees.

In preparation for the deal, TCW has offered all of its investment teams five-year contracts in exchange for new equity in the firm. Managers responsible for 90% of the firm's assets under management have signed up thus far, which should help mitigate any disruption to fundholders.

Although Carlyle will own the majority of the firm's equity, the deal represents something of a reverse takeover on the part of Metropolitan West Asset Management, which was acquired by TCW in late 2009 at the same time that TCW fired its star manager, Jeffrey Gundlach. That's because Met West veteran David Lippman is joining TCW's board and taking over the CEO role from Marc Stern, who will become TCW's chairman after the deal closes. Meanwhile, legacy Metropolitan West co-founder Laird Landmann will join Lippman on the board. The board's other four seats will go to representatives from Carlyle and may include Oliver Sarkozy, brother of the former French President. 

  - source: Morningstar Analysts

Janus Announces Manager Shakeup, Fund Changes
Janus is making several managerial and strategic changes at its fund lineup.

John Eisinger, who took over Neutral-rated Janus Global Select (formerly Orion) JORNX from Ron Sachs in January 2008, left the firm on Aug. 3, 2012, after posting poor, volatile returns. He's been replaced by George Maris, who has run Neutral-rated Janus Worldwide JAWWX since March 2011. Maris plans to keep Global Select's concentrated, all-cap look, but will take smaller sector bets and limit less-liquid stocks to smaller positions.  It is unclear, though, whether he can get the fund back on track. He is off to a weak start at Worldwide.

Janus Emerging Markets JMFTX added a third manager, Hiroshi Yoh, who has worked as an analyst at the firm for just over a year and is based at Janus' recently established Singapore office. Yoh previously spent 12 years as a manager and analyst at Japanese insurance firm Tokio Marine.

Janus Global Market Neutral JLSTX stopped taking new investments on Aug. 3, 2012, and will liquidate around Oct. 15, 2012, due to a dwindling asset base. Assets in the fund have dropped to $26 million from a peak of $1.2 billion in early 2008. Manager Daniel Riff will stay on as the portfolio is wound down and is expected to leave Janus around Oct. 1, 2012.

Janus Real Return Allocation Fund JURAX is getting a makeover effective Oct. 15, 2012. The fund will drop "Allocation" from its name and Armored Wolf will no longer serve as subadvisor. Janus will bring all portfolio-management responsibilities in-house and the firm will also adjust the fund's strategy. It will be anchored by short duration high-yield securities and it will also tactically move among stocks, commodities, and a wide array of Treasury securities to minimize the impact of inflation on the portfolio. The fund's primary benchmark index will change to the Barclays U.S. 1-5 Year TIPS Index, and its secondary benchmark index will change to the Consumer Price Index +200. Janus will also be reducing the expense ratio on all share classes by 26 basis points.

These moves come in the wake of a disappointing second-quarter earnings report for the Denver-based mutual fund company. Janus saw its assets under management in the second quarter dip to $155 billion from $172 billion during the same time period last year. The firm made $23 million on $206 million revenue versus profits of $42 million on $264 million revenue during last year's second quarter. Poor fund performance played a part as some Janus funds carry a performance fee structure.  

Hagstrom to Leave Legg Mason Global Growth
Robert Hagstrom will step down as manager of Legg Mason Capital Management Global Growth LMGTX on Sept. 30, 2012. Comanager Gibboney Huske, who was just named comanager in July 2012 when the fund also changed its investment mandate to a global one from a U.S.-focused one, will be the lead manager of the fund following Hagstrom's departure.

According to the firm, Hagstrom, who notably authored The Warren Buffett Way in 1994, is leaving his portfolio-manager role to pursue a market strategist position. Nonetheless, Hagstrom's departure follows many years of poor performance. The strategy's 10-year record through June 2012 is in the bottom quintile of the large-growth category, and the fund has been in net redemptions since 2008. In fact, the fund's assets shrunk to $170 million at year-end 2011 from a peak of $1.2 billion in 2007.

Hagstrom's departure marks a change at Legg Mason from the high-conviction, star-manager culture of the 1990s to a more risk-centric, moderated approach. The firm's most legendary manager, Bill Miller, stepped down from Legg Mason Capital Management Value LMVTX in April 2012 after a similarly dismal multiyear performance record (although his 30-year record was decent). He remains a comanager on Legg Mason Capital Opportunity Trust LMOPX where he is having a great 2012 so far. Value Trust's new lead manager, Sam Peters, takes a much more measured and risk-aware approach with the fund, though he has also maintained a certain level of conviction. It remains to be seen whether Legg Mason can successfully resolve the tension between its all-in past and its more risk-aware present to produce good results for shareholders once more.

Best Buy Deal Could Boost Funds
Richard Schulze has a plan to take over Best Buy, the struggling electronics retailer he helped found. He's proposed buying the outstanding shares for as much as $26 each, a 20% to 30% premium to their current price. While it's unclear if Schulze can turn around the company, the deal could boost the performance of the 10 funds below who have decent-sized positions in the retailer.

  - source: Morningstar Analysts

Goldman Sachs Announces Manager Changes
Goldman Sachs announced several changes to its management ranks.

Hiroyuki Ito is no longer a named manager on Goldman Sachs Concentrated International Equity GSIFX, Goldman Sachs Strategic International Equity GSAKX, or Goldman Sachs International Small Cap GISAX. Edward Perkin and Alexis Deladerriere continue to manage Goldman Sachs Concentrated International Equity and Goldman Sachs Strategic International Equity. Aidan Farrell and new manager Guarav Rege will manage Goldman Sachs International Small Cap. Edward Perkin joined the management teams of Goldman Sachs Asia Equity GSAGX, Goldman Sachs BRIC GBRAX, and Goldman Sachs Emerging Markets Equity GEMAX. Maria Drew joined as comanager of Goldman Sachs N-11 Equity GSYAX. In addition, Gabriella Antici is no longer a named manager on Goldman Sachs Brazil Equity GZIAX. The firm also announced it will close Goldman Sachs Mid Cap Value GSMCX to new investors on Aug. 4, 2012.

Virtus Adds Manager
Frank Ossino has joined Newfleet Asset Management and has been added to the management team of Virtus Senior Floating Rate PSFRX (which Newfleet subadivses). Ossino will manage the fund with David Albrycht and Kyle Jennings. Ossino, who was a manager at Hartford, moved to Wellington Management when that firm took over the subadvisor duties for Hartford funds. He helped run Neutral-rated Hartford Floating Rate HFLAX for five years until July 2012.

Retrenchment at ETF Firms
FocusShares announced plans to close and liquidate its entire lineup of 15 exchange-traded funds, all of which have minimal asset levels. The Scottrade subsidiary, which launched its ETFs last year, cited current market conditions, the funds' inability to draw assets and their future viability, as well as prospects for growth in the ETFs' assets, for the closing. The FocusShares announcement came during a week of ETF retrenchment, as Direxion announced that it will close and liquidate nine triple-leveraged ETFs next month, and Russell Investments announced that it is undergoing a strategic review of its ETF business.

Robert Dow, a senior partner at Lord Abbett, will retire on Sept. 30, 2012. He will continue to serve as chairman of the board overseeing the firm's funds. 

Steven Bullock replaced Andrew Hatem as portfolio manager of Fidelity Select Medical Delivery FSHCX.

ING American Funds Bond Portfolio IABPX changed its name to ING Bond Portfolio. ING Investment Management also took over subadvisor responsibilities from American Funds. ING also filed to launch ING Strategic Income on Oct. 15, 2012. The fund will invest in a combination of fixed-income funds and fixed-income securities. Christine Hurtsellers, Matthew Toms, and Michael Mata will manage the fund.

Jonas Svallin is now a manager on Schwab Large-Cap Growth SWLSX, Schwab Dividend Equity SWDSX, Schwab International Core Equity SICNX, Schwab Small Cap Equity SWSCX, Schwab Hedged Equity SWHEX, Schwab Financial Services SWFFX, and Schwab Health Care SWHFX.

Brian Pessin is no longer a manager on Lazard International Small Cap Equity LZISX. John Reinsberg, Edward Rosenfeld, and new manager Alex Ingham will manage the fund going forward.

Alan Gutmann is taking a leave of absence from JP Morgan. Gutmann was the lead manager on JPMorgan Large Cap Value OLVAX, JPMorgan U.S. Large Cap Value Plus JTVAX, and JPMorgan Value Opportunities JVOAX. Comanager Aryeh Glatter will take over as lead manager of these funds. Glatter also replaced Gutman as lead manager of the value sleeve of JPMorgan US Equity JUEAX. The firm also announced Garrett Fish joined the management team of JPMorgan Intrepid Multi Cap JICAX. He will manage the fund with Dennis Ruhl and Jason Alonzo.

BlackRock Emerging Market Debt BEDIX will change its name to BlackRock Emerging Market Local Debt on Sept. 3, 2012. The fund's management team also turned over. Sergio Trigo Paz, Raphael Marechal, and Laurent Develay are the new managers of the fund, replacing Daniel Shaykevich, Schott Thiel, and Imran Hussain.

AllianceBernstein Balanced Shares CABNX will change its name to AllianceBernstein Global Risk Allocation on Oct. 8, 2012. The fund will also adopt a more flexible investment mandate to invest in more global asset classes. The managers will be replaced by AllianceBernstein's quantitative investment strategies team, led by Michael DePalma.

AllianceBernstein Small/Mid Cap Growth CHCLX and AllianceBernstein Small/Mid Cap Value ABASX will change their names to AllianceBernstein Discovery Growth and AllianceBernstein Discovery Value, respectively, on Nov. 1, 2012. The funds' mandates and management teams will remain the same.

In October 2012, Margaret Naylor, Arthur Pollock, Alistair Corden-Lloyd, and Alexander Vislykh will no longer manage Morgan Stanley Institutional International Small Cap MSISX. Burak Alici will replace this team as sole manager of the fund.

RS Investments started to manage a portion of John Hancock Natural Resources JNRAX on July 16, 2012. MacKenzie Davis, Andrew Pilara, Jr., and Kenneth Settles, Jr., will run RS Investments' sleeve of the strategy. They join current subadvisor Wellington Management.

Director of fixed-income fund research Eric Jacobson, ETF analyst Robert Goldsborough, senior mutual fund analyst Greg Carlson, and mutual fund analysts Michelle Canavan, Kailin Liu, and Rob Wherry contributed to this report.

Morningstar fund analysts cover more than 1,700 mutual funds and write regular commentary covering fund industry news, fund investing trends, picks, portfolio planning, international investing, and more.

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